India to face US pressure to reduce tariffs on agri products in trade deal negotiations

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While New Delhi is considering a range of items for tariff reductions on US products, Washington, DC is particularly keen on exporting more agricultural goods to India and is seeking a reduction in tariffs in this traditionally high-protection sector, The Indian Express has learnt.Discussions on agricultural tariffs are set to arise during negotiations for the India-US bilateral trade agreement. Early indications suggest that agricultural exports are an “offensive interest” of the new Donald Trump administration, which is looking to boost US exports, a person aware of the development said.The American farming community in mid-Western states has been a key voter base for Trump since 2016. In the recent election, he managed to increase his support among farming-dependent counties, with more than 100 of agri-focused counties backing him with at least 80 per cent of their vote, according to an Investigate Midwest report.Also Read | India, US make goods at different costs, not competitors: Commerce Minister Goyal on US tariff threatsEven as India lowered its basic customs duty on a range of items in the Union Budget, a White House statement on reciprocal tariffs earlier this month pointed out that Indian tariffs on agricultural goods remain significantly higher than those imposed by the US on Indian products.“The US average applied Most Favoured Nation (MFN) tariff on agricultural goods is 5 per cent, while India’s average applied MFN tariff is 39 per cent,” the White House said.However, government officials hope that lowering tariffs on agricultural goods will increase overall trade in agricultural products and could help Indian agricultural exports gain better market access in the US. India primarily exports basmati rice, spices, cereals, dairy, and poultry products to the US.“Both sides are exploring ways in which trade in agricultural items can grow. India exports around $4 million worth of agricultural products to the US every year, and there will be opportunities for growth in Indian agricultural exports as well,” an official said.Story continues below this adAgricultural goods receive high protection in India and have largely remained outside trade agreements, even with countries that traditionally insist on market access for agriculture, such as Australia. Trade experts noted that due to high tariffs on Indian agricultural goods, the sector is also vulnerable to reciprocal tariffs that the US plans to introduce in April.Also Read | Agri items: High protection, high riskGlobal Trade Research Initiative (GTRI), in a note on Friday, stated that the hardest-hit sector due to US reciprocal tariffs will be fish, meat, and processed seafood, with $2.58 billion in exports facing a 27.83 per cent tariff differential.In trade parlance, tariff differential refers to the difference in tariff rates applied to Indian exports compared to other countries or product categories.Story continues below this ad“Shrimp, a major export, will become significantly less competitive. Processed food, sugar, and cocoa exports worth $1.03 billion will also struggle with a 24.99 per cent tariff increase, making Indian snacks and confectionery pricier in the US,” GTRI said.“Edible oils, with $199.75 million in exports, face a 10.67 per cent tariff, increasing costs for coconut and mustard oil. Alcohol, wines, and spirits face the highest tariff hike at 122.10 per cent, though exports are only $19.20 million,” the note said.Live animals and animal products face a 27.75 per cent tariff differential on $10.31 million in exports. Tobacco and cigarettes, valued at $94.62 million, will remain unaffected, as the US already imposes 201.15 per cent tariffs, creating a negative tariff differential (-168.15 per cent), it added.Trump revised NAFTA deal for agri exportsThe United States–Mexico– Canada Agreement (USMCA), signed during Donald Trump’s first term, replaced the earlier North American Free Trade Agreement (NAFTA) to improve market access for US agricultural products.Story continues below this adAccording to the US Department of Agriculture (USDA), the new deal expanded opportunities for US dairy producers by granting increased access to the Canadian market. “Canada agreed to eliminate its Class 6 and 7 milk pricing programmes, which had previously allowed Canadian producers to undercut US dairy prices,” the USDA said. The department further stated that USMCA addressed issues related to wheat trade by requiring Canada to terminate its discriminatory wheat grading system. This change enables US wheat growers, especially those near the border, to compete more effectively in the Canadian market, the USDA said.Agricultural focus in the US-China dealThe US-China trade deal, signed during Trump’s first term, included provisions aimed at boosting US agricultural exports to China. A US Trade Representative (USTR) statement on the deal indicated that, during the two-year period from January 1, 2020 to December 31, 2021, China was required to import certain US agricultural products worth: “at least $12.5 billion above the corresponding 2017 baseline amount in calendar year 2020” and “no less than $19.5 billion above the corresponding 2017 baseline amount in calendar year 2021”.The deal also required China to remove certain non-tariff barriers that had previously blocked US exports, such as eliminating “cattle age” requirements for US beef imports, according to the USTR statement.A query emailed to the Ministry of Commerce and Industry remained unanswered at the time of publication.